Meeting a Christmas Deadline

As we expected, the Senate moved forward with hitting their self-imposed “Christmas Deadline” to passing their own version of health care reform legislation. Some pretty interesting “sweet deals” were cut to get to the 60 votes Harry Reid needed to prevent a Republican filibuster. Now, they have to reconcile this legislation with what was passed in the House in order to send a final bill to the President for signature. That’s going to be interesting.

CBO released its own estimates of the financial impact of this legislation a few days ago. We’re going to be hearing about the $132 billion in net deficit reduction that will result from this legislation for momentum from the politicians to move this thing forward and justifying their actions. While the CBO is allegedly non-partisan, we just have a difficult time reconciling the numbers with reality.

We’ve also posted CBO’s correction to the letter that softens the savings impact estimated in the original letter for the 2020-2030 time-period. We don’t hold much confidence in estimates 20 years out anyway- but we’re sure the Republicans will likely jump on the error for some political leverage.

Here’s our take on some of the points of the Senate legislation based upon what we’re reading from the original CBO letter:

1. Net deficit reduction of $132 billion between 2010 and 2019 (sounds good- but we still question the reconciliation with reality)

2. The deficit will actually increase in 2010 because the legislation won’t really kick in until later. (If this occurs- this will be a major talking-point for the Republicans in the 2010 elections)

3. Health care premiums for employers and individuals will continue to increase in 2010 and the legislation actually won’t have significant impact on health insurance premiums throughout the 2010-2019 period. Even though federal tax credits may be available, they won’t do much for the employer or individual consumer in assuring that we are really doing something to address rising costs when they continue to increase. (This is another talking-point for the Republicans in 2010)

4. Most of the savings will come from the provider side and hospitals and physicians they will take a significant hit. We certainly agree that to deal with costs you have to go to the source but continuing to focus on fee-for-service savings when a new reimbursement model is needed for real reform is simply a mistake. (Providers- be ready)

5. The CBO didn’t include the “discretionary costs” of the IRS and HHS that will be required to put this in place. They currently estimate between $10 billion and $20 billion will be required, which would take the net deficit reduction down to between $122 billion and $112 billion if the numbers hold. (We think it will be more- and the IRS and HHS need to go to Congress to get this funding- which will be tough)

6. The unfunded mandates required for state and local governments are huge with this. The federal government will help for a time, but state and local governments are going to have to eventually pony-up to assist with Medicaid and SCHIP financing (with the exception of Nebraska); Hopefully, our economy is going to be at a better place when the state financing requirements kick in.

7. The public option idea is now replace by an “OPM Managed Exchange” that will be administered by 2 national or multi-state insurance plans- one which must be non-profit. (We’ll be relying on the same stakeholders Congress has vilified to now provide coverage through an exchange- an interesting turn-of-events).

As we have said from the beginning, we absolutely support the need for reforming our existing health care system. We just believe it should occur first by re-organizing care delivery as opposed to reforming the insurance/financing method. We have enough examples to know that covering everyone without reforming delivery only results in higher costs. And, costs are increased, and citizens are being hurt by the delivery system that is in place today.

We encourage all citizens to become much more informed with what is taking place. Our views are only our views and intended to provide a perspective to consider. The American people need to become informed about how this system works as they will be dealing with the results.

Regardless of the outcome, this is a historic time for health care. It’s just unfortunate we’re relying on legislation to make the changes we need. There are some good things included in the bills presented to help the average citizen but we had hoped the market would make the changes on its own. It didn’t, and now we have to deal with it at a different level.

Merry Christmas